A humbled John Paulson told investors on Thursday he was too aggressive with some of the stock bets in his flagship funds and he is trimming back some of his riskiest holdings.

The hedge fund manager told investors in a conference call that he is limiting his funds' riskier stocks by moving away from bank holdings with heavy mortgage exposure.

The investor call came after a tumultuous first half of the year for Paulson, whose flagship Paulson Advantage fund lost about 12 percent. A related fund called Advantage Plus was off 18 percent.

A good deal of the funds' slump came from a disastrous bet on Sino Forest, which lost much of its value because of accounting concerns at the foreign company.

The biggest loss was Sino Forest. We took a nasty hit on it, but there was also other losses, said Paulson during the investor call, which Reuters heard portions of.

The Advantage Funds oversee roughly $18 billion in assets, a big portion of Paulson & Co's roughly $38 billion in assets.

Paulson said he cut the net long exposure from roughly 81 percent to about 60 percent, and plans to cut it more. Eighty-one percent was way too high. We cannot operate the fund at level, he said. I'd like to bring the risk down further to about 50 percent.

As a long-time owner of large financial companies such as Bank of America and Citigroup , Paulson called said the former -- his sixth largest position at the end of the first quarter -- was somewhat of a disappointment.

He said his team of analysts did not expect the magnitude of the mortgage problems to be so great.

To reposition the portfolio, Paulson said he diversified into financial companies with less exposure to mortgage loans, noting that he liked Capital One and Wells Fargo , two names he owned at the end of the first quarter.

He also said he increased his bet that the euro currency would fall as a hedge against further fallout from Europe's debt crisis.

(Editing by Matthew Goldstein and Robert MacMillan)